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CIRCULAR

Guiding the application of Vietnam's particularly preferential import tax rates for the implementation of the Asean-China Agreement on Trade in Goods

Pursuant to Law No. 45/2005/QH11 of June 14, 2005, on Import Tax and Export Tax, and the Government's Decree No. 149/2005/ND-CP of December 8, 2005, detailing the implementation of the Law on Import Tax and Export Tax;

Pursuant to the Government's Decree No. 154/2005/ND-CP of December 15, 2005, detailing the implementation of a number of articles of the Customs Law regarding customs procedures, customs inspection and supervision;

Pursuant to the Government's Decree No. 77/2003/ND-CP of July 1, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to the Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the People's Republic of China (hereinafter referred to as the ASEAN-China Agreement on Trade in Goods for short), signed on November 29, 2004, in Laos, and the Memorandum of Understanding between Vietnam and China on a number of issues in the ASEAN-China Agreement on Trade in Goods, signed on July 18, 2005, in China, and approved by the Prime Minister under Decision No. 257/QD-TTg of October 19, 2005;

Pursuant to the Prime Minister's directing opinions in the Government Office's Official Letter No. 216/VPCP-QHQT of March 17, 2006;

The Ministry of Finance hereby guides the application of Vietnam's particularly preferential import tax rates for the implementation of the ASEAN-China Agreement on Trade in Goods as follows:

I. Scope and conditions of application

1. To be eligible for the application of Vietnam's particularly preferential import tax rates for the implementation of the ASEAN-China Agreement on Trade in Goods, promulgated by the Finance Minister (hereinafter referred to as Vietnam's ACFTA tax rates for short), imported goods shall fully meet the following conditions:

a/ Being on Vietnam's list of goods and their particularly preferential import tax rates for the implementation of the ASEAN-China Agreement on Trade in Goods, promulgated by the Finance Minister (hereinafter referred to as Vietnam's ACFTA list for short).

b/ Being imported into Vietnam from member countries of the ASEAN-China Agreement on Trade in Goods, including:

- Brunei Darussalam;

- The Kingdom of Cambodia;

- The Republic of Indonesia;

- The Lao People's Democratic Republic;

- Malaysia;

- The Federation of Myanmar;

- The Republic of the Philippines;

- The Republic of Singapore;

- The Kingdom of Thailand; and

- The People's Republic of China.

c/ Being transported directly to Vietnam from exporting countries being members of the ASEAN-China Agreement on Trade in Goods as specified in the Trade Minister's Decisions No. 1727/2003/QD-BTM of December 12, 2003, and Decision No. 09/2006/QD-BTM of February 24, 2006.

d/ Satisfying the ASEAN-China origin requirements, with certificates of ASEAN-China origin (hereinafter referred to as form-E C/Os for short), as specified in Section III of this Circular, except for imported goods lots with a total value (at FOB price) not exceeding USD 200 each, for which form-E C/Os are not required.

e/ Being on exporting countries' list of products for normal tariff elimination (NT list) or list of products for tariff elimination under early harvest program (EHP list) for the implementation of the ASEAN-China Agreement on Trade in Goods, defined in Appendix I to this Circular.

2. To be eligible for Vietnam's ACFTA tax rates, promulgated by the Finance Minister, goods from non-tariff areas (including processed goods), which are imported into the domestic market, shall satisfy conditions specified at Points a and d, Clause 1, Section I of this Circular.

3. For imported goods which satisfy conditions specified at Points a, b, c and d, Clause 1, Section I of this Circular but are on exporting countries' sensitive tariffs (ST list) defined in Appendix I to this Circular, their import tax rates shall comply with the provisions of Clause 2, Section II of this Circular.

II. Applicable import tax rates

1. Import tax rates applicable to imported goods satisfying conditions specified in Clauses 1 and 2, Section I of this Circular shall be Vietnam's ACFTA tax rates applicable in each year which are specified on Vietnam's list of goods and their particularly preferential import tax rates for the implementation of the ASEAN-China Agreement on Trade in Goods, promulgated by the Finance Minister.

Example 1: For dried chilies (under subheading 0904.20.10), the current preferential import tax rate (the MFN tax rate) in the Preferential Import Tariff is 30% and Vietnam's ACFTA tax rate is 25% under the Finance Minister's decision. According to Appendix I to this Circular, dried chilies is on China's NT list. In this case, the import tax rate applicable to dried chilies imported from China shall be the Vietnam's ACFTA tax rate (25%), provided that all conditions specified in Clause 1, Section I of this Circular are satisfied.

Example 2: For dried chilies (under subheading 0904.20.10), the MFN tax rate is 30% and Vietnam's ACFTA tax rate is 25% under the Finance Minister's decision. The import tax rate applicable to dried chilies imported from non-tariff areas into the domestic market shall be Vietnam's ACFTA tax rate (25%), provided that conditions specified at Point d, Clause 1, Section I of this Circular are satisfied.

2. Import tax rates applicable to imported goods which satisfy conditions specified in Clause 3, Section I of this Circular are provided for as follows:

a/ Where the Finance Ministry has announced in writing that the exporting countries' import tax rates for the implementation of the ASEAN-China Agreement on Trade in Goods (hereinafter referred to as exporting countries' ACFTA tax rates for short) applicable to imported goods on their ST list are 10% or lower, the applicable import tax rates shall be either Vietnam's ACFTA tax rates or the exporting countries' ACFTA tax rates, depending on which are higher.

Example 3: For dried chilies (under subheading 0904.20.10), the MFN tax rate is 30% and Vietnam's ACFTA tax rate is 25% under the Finance Minister's decision. According to Appendix I to this Circular, dried chilies are on Myanmar's ST list and, at the same time, the Finance Ministry has announced in writing that the Myanmar's ACFTA tax rate applicable to dried chilies is 8%. In this case, the import tax rate applicable to dried chilies imported from Myanmar shall be Vietnam's ACFTA one (25%), provided that all conditions specified at Points b, c and d, Clause 1, Section I of this Circular are satisfied.

b/ Where the Finance Ministry has not yet made any written announcement that an exporting country's ACFTA tax rates applicable of imported goods on its ST list are 10% or lower, the applicable import tax rates shall be the MFN ones.

Example 4: For dried chilies (subheading 0904.20.10), the MFN tax rate is 30% and Vietnam's ACFTA tax rate is 25% under the Finance Minister's decision. According to Appendix I to this Circular, dried chilies is on Myanmar's ST list and the Finance Ministry has not yet made any written announcement on Myanmar's ACFTA tax rate applicable to dried chilies. In this case, the import tax rate applicable to dried chilies imported from Myanmar shall be the MFN tax rates (30%), although all conditions specified at Points b, c and d, Clause 1, Section I of this Circular are satisfied.

3. Where the MFN tax rate of a goods item specified in the Preferential Import Tariff is adjusted to be lower than the applicable ACFTA tax rate (Vietnam's ACFTA tax rate or exporting country's ACFTA tax rate), the import tax rate applicable to such goods item shall be the MFN one.

Example 5: For steel plates and sheets containing by weight less than 0.6% of carbon (under subheading 7208.38.10), the MFN tax rate is 0% and Vietnam's ACFTA tax rate is 5% under the Finance Minister's decision. According to Appendix 1 to this Circular, such goods item is on China's NT list. In this case the import tax rate applicable to such goods items imported from China shall be the MFN one (0%).

Example 6: For steel plates and sheets containing by weight less than 0.6% of carbon (under subheading 7208.38.10), the MFN tax rate is 0% and Vietnam's ACFTA tax rate is 5% under the Finance Minister's decision. According to Appendix 1 to this Circular, such goods item is on the Philippines' NT list and, at the same time, the Finance Ministry has announced in writing that the Philippines's ACFTA tax rate applicable to such goods item is 3%. In this case, the import tax rate applicable to such goods item imported from the Philippines shall be the MFN one (0%).

Example 7: For steel plates and sheets containing by weight less than 0.6% of carbon (under subheading 7208.38.10), the MFN tax rate is 0% and Vietnam's ACFTA tax rate is 5% under the Finance Minister's decision. According to Appendix 1 to this Circular, such goods item is on Malaysia's ST list and, at the same time, the Finance Ministry has announced in writing that Malaysia's ACFTA tax rate applicable to such goods item is 7%. So that the import tax rate applicable to such goods item imported from Malaysia shall be the MFN one (0%).

4. Basic steps in referring applicable import tax rates specified in Clauses 1, 2, and 3, Section II of this Circular are guided in detail in Appendix II to this Circular.

5. Goods imported by enterprises for manufacture and/or assembly of mechanical, electrical and electronic products which meet both the conditions for application of ACFTA tax rates and application of import tax rates based on localization rates shall comply with the following:

Where enterprises choose to apply tax rates based on localization rates, when importing details or detail assemblies not in complete sets, they shall apply a single tax rate based on the localization rate to the whole list of imported details or detail assemblies, though there are details eligible for the application of ACFTA tax rates on such list.

Where enterprises choose to apply ACFTA tax rates, details or detail assemblies not in complete sets which are eligible for ACFTA tax rates shall enjoy such ACFTA tax rates; other details and detail assemblies shall enjoy MFN tax rates or ordinary tax rates.

6. ACFTA tax rates applicable to knocked-down details and components in complete sets imported for assembly of mechanical, electrical and electronic products are as follows:

Knocked-down details (detail assemblies) and components (component assemblies) in complete sets accompanied with form-E C/Os shall be eligible for ACFTA tax rates applicable to complete goods items if they meet all conditions for the application of ACFTA tax rates specified in Section I of this Circular. For other knocked-down details and components without form-E C/Os, MFN tax rates or ordinary tax rates applicable to complete goods items shall apply.

For enjoying ACFTA tax rates, enterprises should present a common commercial invoice or several separate ones for details (detail assemblies) or components (components assemblies) accompanied with form-E C/Os.

ACFTA tax rates shall apply at the time of tax calculation according to the provisions of law on import tax and export tax. Procedures for import tax finalization with customs offices shall comply with current regulations.

Principles for classification of components in complete and incomplete sets shall comply with the Finance Ministry's Circular No. 85/2003/TT-BTC of August 29, 2003, guiding the classification of goods according to the list of imported and exported goods, the Preferential Import Tariff, the Export Tariff and relevant legal documents.

7. When importing automobile CKD component sets, importing enterprises may apply ACFTA tax rates only to each automobile component or spare part on Vietnam's list of goods and their particularly preferential import tax rates for the implementation of the ASEAN-China Agreement on Trade in Goods, promulgated by the Finance Ministry. Conditions for the application of ACFTA tax rates shall comply with the provisions of Section I of this Circular.

8. ACFTA tax rates applicable to goods processed in non-tariff areas and imported into the domestic market shall be Vietnam's ACFTA tax rates applicable to imported processed goods items on Vietnam's list of goods and their particularly preferential tax rates for implementation of the ASEAN-China Agreement on Trade in Goods, promulgated by the Finance Minister.

9. Where customs declarants fail to present form-E C/Os at the time of registration of customs declarations of imported goods, but the imported goods satisfy conditions specified in Section I of this Circular:

a/ For taxpayers that have properly observed tax laws as specified in Part C of the Finance Ministry's Circular No. 113/2005/TT-BTC of December 15, 2005, guiding the implementation of import tax and export tax, taxes shall be calculated at ACFTA tax rates according to customs declarants' commitments and declarations.

Where they fail to present form-E C/Os within the time limit set at Point b, Clause 5, Section III of this Circular, customs offices shall re-calculate taxes and impose sanctions according to current regulations.

b/ For taxpayers that have not properly observed tax laws as specified in Part C of the Finance Ministry's Circular No. 113/2005/TT-BTC of December 15, 2005, guiding the implementation of import tax and export tax, taxes shall be temporarily calculated at MFN tax rates. When they present form-E C/Os within the time limit set at Point b, Clause 5, Section III of this Circular, customs offices shall re-calculate taxes at ACFTA tax rates applicable to such goods as prescribed.

III. C/Os and examination of C/Os

1. Rules for goods to be recognized as having the ASEAN-China origin are defined in the Regulation on grant of Vietnam's certificates of origin, form E, promulgated together with the Trade Ministry's Decision No. 1727/2003/QD-BTM of December 12, 2003, Decision No. 09/2006/QD-BTM of February 24, 2006, and other relevant decisions.

2. C/Os must bear signatures and stamps compatible with the official specimen signatures and stamps of the following agencies of member countries of the ASEAN-China Agreement on Trade in Goods, which are competent to grant form-E C/Os:

- In Brunei Darussalam: The Ministry of Foreign Affairs and Foreign Trade;

- In the Kingdom of Cambodia: The Ministry of Trade;

- In the Republic of Indonesia: The Ministry of Trade;

- In the Lao People's Democratic Republic: The Ministry of Trade;

- In Malaysia: The Ministry of Foreign Trade and Industry;

- In the Federation of Myanmar: The Ministry of Trade;

- In the Republic of the Philippines: The Ministry of Finance;

- In the Republic of Singapore: The Customs Authority;

- In the Kingdom of Thailand: The Ministry of Trade; and,

- In the People's Republic of China: The General Department for Quality Surveillance, Inspection and Quarantine.

3. Form-E C/Os for goods imported from non-tariff areas into the domestic market must bear signatures and stamps compatible with the official specimen signatures and stamps of agencies authorized by the Trade Ministry to grant form-E C/Os.

4. Form-E C/Os shall be valid for four months from the date of grant by competent agencies of exporting countries being member countries of the ASEAN-China Agreement on Trade in Goods. In cases where the imported goods are transported via the territory of one or several countries which are not members of the ASEAN-China Agreement on Trade in Goods as specified in Rule 8 (c) of Appendix 1 to the Trade Minister's Decision No. 1727/2003/QD-BTM of December 12, 2003, the validity duration of form-E C/Os shall be extended to 06 months.

5. Regulations on presentation of form-E C/Os:

a/ The time for presenting form-E C/Os to customs offices shall be the time of registration of customs declarations of imported goods.

b/ Where form-E C/Os cannot be presented at the time of registration of customs declarations of imported goods for plausible reasons, heads of Customs Sub-Departments may decide to extend the time limit for submission thereof up to 30 days from the date of customs declaration registration.

c/ Where form-E C/Os are presented within the time limit set at Point a or b, Clause 5, Section III of this Circular, but such C/Os have expired for plausible or force majeure reasons beyond the exporters' control, heads of Customs Sub-Departments may decide on the acceptance of such C/Os in writing.

6. In case of suspicion of the truthfulness or accuracy of form-E C/Os, customs offices may:

a/ Request the re-examination of form-E C/Os: Customs offices shall send their requests to exporting countries' agencies competent to grant such C/Os for certification.

b/ Stop the application of ACFTA tax rates and temporarily collect taxes at MFN tax rates or ordinary tax rates. Request importers to provide additional documents (if any) to prove the goods' ASEAN-China origin within 365 days after form-E C/Os are submitted to customs offices. After sufficient documents to prove the goods' ASEAN-China origin are submitted, customs offices shall carry out procedures for returning to the importers the difference between the tax amounts temporarily collected at MFN tax rates or ordinary tax rates and those calculated at ACFTA tax rates as specified at Section II of this Circular.

Pending the availability of re-examination results, continue carrying out the procedures for the release of goods according to general import regulations.

Order and procedures for requesting the re-examination shall comply with the provisions of the Regulation on the grant of Vietnam's certificates of ASEAN origin ' form E, promulgated together with the Trade Minister's Decision No. 1727/2003/QD-BTM of December 12, 2003, Decision No. 09/2006/QD-BTM of February 24, 2006, and other relevant decisions.

IV. Other provisions

1. For goods under customs declarations of imported goods registered with customs offices between January 1, 2006, and the effective date of this Circular, for which import tax has been calculated at MFN tax rates or ordinary tax rates, form-E C/Os and other relevant vouchers may be additionally submitted to serve as a basis for re-calculation of payable import tax amounts and for import tax refund according to the provisions of this Circular.

A dossier of consideration for import tax refund comprises:

- An official letter of the taxpayer, requesting the return of the difference between the paid import tax amount and the tax amount calculated at the applicable ACFTA tax rate as specified in this Circular (the original).

- The customs declaration of imported goods, for which customs procedures have been carried out (true copy)

- Form-E C/Os specified in Section III of this Circular (the original).

- Vouchers on payment of import tax (true copies).

- The import contract (true copy).

- The contract on entrusted import, for cases of entrusted import (true copy)

- The list of enclosed documents.

The deadline for submission of the aforesaid import tax refund dossiers is October 31, 2006.

Provincial/municipal Customs Departments shall receive dossiers, consider and effect import tax refund to eligible subjects in strict accordance with regulations.

Provincial/municipal Customs Departments shall check and deal with to be-refunded tax amounts in the following order: deducting tax amounts, fines and other amounts owed by taxpayers to the budget; offsetting tax amounts and other amounts payable for the subsequent lots of imported goods or exported goods at the request of taxpayers; refunding tax amounts from the state budget.

Where tax amounts are refunded from the state budget, provincial/municipal Customs Departments shall request the Finance Ministry (the State Budget Department) to directly refund tax amounts to subjects eligible therefor according to tax refund decisions of provincial/municipal Customs Department.

2. Provisions on tax bases, collection, payment, exemption, reduction, and refund (except provisions on tax refund defined in Clause 1, Section IV of this Circular), collection of tax arrears, complaints, handling of violations, and other matters shall comply with the provisions of the Law on Import Tax and Export Tax, the Customs Law and current guiding documents.

3. In case of changes in goods items in legal documents promulgated by ASEAN countries and China for the implementation of the ASEAN-China Agreement on Trade in Goods or for other reasons which result in changes in Appendix I to this Circular or affect the rights to apply Vietnam's ACFTA tax rates specified in Section II of this Circular, the Finance Ministry shall provide appropriate guidance on a case-by-case basis.

V. Organization of implementation

This Circular takes effect 15 days after its publication in "CONG BAO" and applies to customs declarations of imported goods registered with the customs offices as from January 1, 2006.

Any difficulties and problems arising in the course of implementation should be reported to the Finance Ministry for additional guidance as appropriate.